LOS ANGELES, May 4 (Reuters) - MGM Mirage (MGM.N) posted a quarterly profit only after a huge gain from selling a resort, but its shares rose 5 percent after the largest Las Vegas Strip casino operator said room cancellations were slowing.

Excluding a gain of 44 cents per share on the sale of the Treasure Island resort and other one-time items, MGM posted a loss as gamblers stayed home and businesses canceled conventions and meetings.

The No. 2 casino operator, which is controlled by billionaire Kirk Kerkorian, posted first-quarter net income of $105.2 million, or 38 cents per share, compared with $118.3 million, or 40 cents per share, in the year-earlier period.

Without the Treasure Island gain, MGM’s cash flow fell short of expectations, said Oppenheimer analyst David Katz.

MGM shares, which rose more than 20 percent to close at $9.47 on the New York Stock Exchange, were up another 5 percent in after-hours trading. The stock has fallen about 82 percent over the past year.

“It feels to me as though the shares are way ahead of themselves given this number and given the valuation,” said Katz, who rates MGM shares as “perform.”

“Cancellations have tapered off and we see signs that business levels seem to be stabilizing,” Jim Murren, MGM’s chairman and chief executive, said on a conference call.

Net revenue fell 20 percent to $1.5 billion.

MGM and Dubai World, joint venture partners in the CityCenter project now under construction on the Las Vegas Strip, settled a legal dispute last week over the $8.5 billion development and said they had secured financing, clearing the way for it to open by the year-end.

MGM, burdened by $14 billion in debt, also gained a waiver from lenders giving it until June 30 to bring borrowings into line with financial covenants.

The company, which warned last month that auditors had questioned its ability to continue operating as a “going concern,” said on Monday that it was continuing to seek a long-term solution to improve its financial position.

Murren told Reuters that advisors have offered “10 or 12 different solutions,” ranging from raising enough funds to pay off the just over $1 billion of debt maturing this year to more comprehensive plans to reduce debt over the long term.

He said MGM is continuing to evaluate purchase offers for some of its other properties and noted any future sales “more likely will not be on the Strip.”

The company’s holdings include nine Las Vegas Strip casino-hotels, gambling resorts in Mississippi and Michigan, as well as joint ventures in New Jersey and China’s Macau.

“You cannot sell assets on the way to recovery. That will not get you home,” Murren said.

He also said MGM, which acquired Mirage Resorts in 2000 and Mandalay Resorts in 2005, decided long ago to concentrate its expertise in Las Vegas.

“We’ve never felt a need to be geographically diversified,” Murren said.

MGM said occupancy at its Las Vegas Strip resorts was unusually low in January, improved in February and returned to a normalized level of around 95 percent in March.

But hotel rates were cut to attract business and revenue per available room fell 34 percent from a year earlier to $102 for the quarter.